EU competition watchdog raids Telefónica, Deutsche Telecom and Orange

The European Union's top antitrust watchdog has carried out unannounced raids on Telefónica, Deutsche Telecom and Orange.

The European Commission is concerned that the three companies may have violated E.U. competition rules prohibiting the abuse of a dominant market position, it said Thursday.

E.U. rules require incumbent network operators to provide wholesale broadband Internet service at regulated rates to other ISPs or content providers. "This is crucial for the functioning of the Internet and for end users' ability to reach Internet content with the necessary quality of service, irrespective of the location of the provider," the Commission said. Alternative providers then compete for end users with the incumbent network providers.

The Commission is understood to be looking into network operators' use of deep packet inspection, a technique that allows them to identify the type of content that runs through their networks and allows them to throttle traffic from particularly demanding applications such as video streaming or VoIP calls. While such filtering could be performed anywhere in the network path, throttling at the wholesale level lessens the ability for independent ISPs to differentiate their services from those of the incumbent operators.

Deutsche Telekom said in a statement that it was "very surprised" by the Commission's investigations, adding that similar investigations at a national level had been dropped.

"Deutsche Telekom faces intense competition on the global Internet traffic market. The market is dominated by big U.S. providers, and as such we are not the right target of these investigations," it said.

Meanwhile Orange, known until July 1 as France Télécom, is extending its full cooperation to the European Commission, it said. It is confident the matter will be dropped since the French competition authority has already exonerated the company in a similar case following complaints by U.S. network operator Cogent.

In response to a Commission consultation last year, Cogent said: "There is currently a problem of net neutrality and the openness of the internet in Europe. Cogent observes a breach in net neutrality at the hands of European incumbent access providers, primarily Deutsche Telekom and France Télécom."

It is not known whether the raids conducted on Tuesday stemmed from this or any other complaint, as the Commission can begin such investigations on its own initiative.

In 2007, the European Commission fined Telefónica €151.85 million (around US$200 million) for unfairly squeezing rivals by setting wholesale access prices too high for them turn a profit.

There is no legal deadline for the Commission to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of each case, the extent to which the undertakings concerned cooperate with the Commission, and the exercise of the rights of defence.

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